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Reuters: Shell gets US approval for offshore Arctic drilling

Wed Feb 21, 2007 12:39PM EST
By Robert Campbell

NEW YORK (Reuters) – U.S. regulators have approved Royal Dutch Shell Plc’s plan to drill up to four exploration wells in Arctic waters off the northern coast of Alaska this summer.

The Minerals Management Service, which manages federal offshore waters, approved the plans February 15 following an environmental impact study conducted by the MMS.

The exploration wells will test the multimillion-dollar bet Shell made on the area in 2005, when it snapped up the bulk of the offshore drilling rights offered by the MMS in its Beaufort Sea lease sale.

The leases are for drilling in federal waters between Prudhoe Bay and the Arctic National Wildlife Refuge.

The resumption of oil exploration in the Beaufort Sea has drawn protests from environmental groups, such as Earthjustice, that say the environmental studies conducted by the MMS were insufficiently detailed.

The waters where Shell plans to drill are home for part of the summer to bowhead whales, which are listed as an endangered species. Polar bears and other arctic wildlife live nearby.

Included in the $44 million package of leases is the Sivulliq prospect, an offshore oil field discovered in the 1980s but later abandoned by Chevron and Unocal as uneconomical.

Shell plans to drill four wells on the Sivulliq prospect this summer, once the arctic ice pack breaks up. Further drilling is set for 2008 and 2009.

A drill ship, the Frontier Discoverer, and a semisubmersible drilling rig, the Kulluk, have been contracted by Shell and are being refurbished and strengthened for Arctic operations.

A flotilla of support vessels, including icebreakers, also have been contracted to help ferry supplies to the rigs as well as monitor ice floes.

The drilling marks Shell’s first return to Alaska since 1998, when it sold or relinquished its exploration assets in the state.

Malcolm Brinded, head of Shell’s upstream business, described Alaska as a major new focus area for the company in its February strategy update.

In addition to Sivulliq, Shell has also identified another five areas where it wants to drill on the acreage it holds in the Beaufort and nearby Chukchi seas.

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